Verigy (VRGY)

We design, develop, manufacture and sell advanced test systems and solutions for the semiconductor industry. We offer a single platform for each of the two general
categories of devices being tested: our V93000 Series platform, designed to test System-on-a-Chip (SOC), System-in-a-Package (SIP) and high-speed memory devices, and our V5000 Series platform, designed to test memory devices,
including flash memory and multi-chip packages. In the first quarter of fiscal year 2009, we introduced our V6000 Series platform, which is the successor to the V5000 platform and is designed to test both flash memory and dynamic random access
memory (DRAM) devices. Our test platforms are scalable across different frequency ranges, different pin counts and different numbers of devices under simultaneous test. The test platforms flexibility also allows for a single test
system to test a wide range of semiconductor device applications. Our single scalable platform strategy allows us to maximize operational efficiencies such as relatively lower research and development costs, engineering headcount, support
requirements and inventory risk. This platform strategy also provides economic benefits to our customers by allowing them to move their complex, feature-rich semiconductor devices to market quickly and to reduce their overall costs. In addition to
our test platforms, our product portfolio includes advanced analysis tools, as well as consulting, service and support offerings such as start-up assistance, application services and system calibration and repair.

As of April 30, 2009, we have installed nearly 2,000 V93000 Series systems and almost 2,600 V5000 Series systems worldwide. We have a broad customer base which
includes integrated device manufacturers (IDMs), test subcontractors, also referred to as subcontractors or outsourced sub-assembly and test providers (OSATs), which includes specialty assembly, package and test companies as
well as wafer foundries, and fabless companies that design, but contract with others for the manufacture of integrated circuits (ICs).

We design, develop, manufacture and sell
advanced test systems and solutions for the semiconductor industry. We offer a single platform for each of the two general categories of devices being tested: our V93000 Series platform, designed to test System-on-a-Chip (SOC),
System-in-a-Package (SIP) and high-speed memory devices, and our V5000 Series platform, designed to test memory devices, including flash memory and multi-chip packages. In the first quarter of fiscal year 2009, we introduced our V6000
Series platform which is the successor to the V5000 platform and was designed to test both flash memory and dynamic random access memory (DRAM) devices. Our test platforms are scalable across different frequency ranges, different pin
counts and different numbers of devices under simultaneous test. The test platforms flexibility also allows for a single test system to test a wide range of semiconductor device applications. Our platform strategy allows us to maximize
operational efficiencies such as relatively lower research and development costs, engineering headcount, support requirements and inventory risk. This platform strategy also provides economic benefits to our customers by allowing them to move their
complex, feature-rich semiconductor devices to market quickly and to reduce their overall costs. In addition to our test platforms, our product portfolio includes advanced analysis tools as well as consulting, service and support offerings such as
start-up assistance, application services and system calibration and repair.

As of January 31, 2009, we have installed more than 1,900 V93000 Series
systems and almost 2,600 V5000 Series systems worldwide. We have a broad customer base which includes integrated device manufacturers (IDMs), test subcontractors, also referred to as subcontractors or outsourced sub-assembly and test
providers outsourced sub-assembly and test providers (OSATs), which includes specialty assembly, package and test companies as well as wafer foundries, and fables companies that design, but contract with others for the manufacture of
integrated circuits (ICs).

We believe that the quality, experience, skills, engagement and dedication of our executive officers are critical factors affecting Verigys
performance and our ability to drive long-term growth of shareholder value. These factors guide our primary executive compensation philosophy: that total compensation should be established at a competitive level to attract, motivate and retain the
superior executive talent necessary to achieve our business objectives. Our compensation philosophy recognizes that we compete for superior executive talent in a highly competitive market and that retention of executive talent is enabled through
reinforcement of a strong pay for performance compensation system which provides the opportunity to earn above average compensation in return for business and financial success, and the sustained delivery of the results, leadership and innovation
necessary to drive long-term growth of shareholder value.

We regularly monitor
trends, conduct benchmarking studies and generally strive to position our executives overall compensation between the 25th and 75th percentiles of compensation levels of our peer groups. However, we do not adhere to specific formulas, internal pay multiples or market positioning when
determining any individual executives compensation.

Verigy Ltd. ("we," "us" or the "Company") designs, develops, manufactures and supports semiconductor test equipment and provides
test system solutions that are used in the manufacture of System-on-a-Chip ("SOC"), System-in-a-Package ("SIP"),
high-speed memory and memory devices. In addition to our test equipment, our product portfolio includes advanced analysis tools as well as consulting, service and support offerings such as
start-up assistance, application services and system calibration and repair.

Prior
to our initial public offering, we were a wholly owned subsidiary of Agilent Technologies, Inc. ("Agilent"). We became an independent company on June 1, 2006, when we
separated from Agilent. On June 13, 2006, we completed our initial public offering and became a separate stand-alone publicly-traded company incorporated in Singapore focused on technology and
innovation in semiconductor testing. Effective October 31, 2006, Agilent distributed the 50 million Verigy ordinary shares it owned to its shareholders.

Overview

Verigy Ltd. ("we," "us" or the "Company") designs, develops, manufactures and supports semiconductor test equipment and providestest system solutions that are used in the manufacture of System-on-a-Chip ("SOC"), System-in-a-Package ("SIP"),high-speed memory and memory devices. In addition to our test equipment, our product portfolio includes advanced analysis tools as well as consulting, service and support offerings such asstart-up assistance, application services and system calibration and repair.

Priorto our initial public offering, we were a wholly owned subsidiary of Agilent Technologies, Inc. ("Agilent"). We became an independent company on June 1, 2006, when weseparated from Agilent. On June 13, 2006, we completed our initial public offering and became a separate stand-alone publicly-traded company incorporated in Singapore focused on technology andinnovation in semiconductor testing. Effective October 31, 2006, Agilent distributed the 50 million Verigy ordinary shares it owned to its shareholders.

Prior to our initial public offering, we were a wholly-owned subsidiary
of Agilent Technologies, Inc (Agilent).
We became an independent company on June 1, 2006, when we separated
from Agilent. On June 13, 2006, we
completed our initial public offering and became a separate stand-alone
publicly-traded company incorporated in Singapore focused on technology and
innovation in semiconductor testing. We
design, develop, manufacture and sell advanced test systems and solutions for
the semiconductor industry. We offer a
single platform for each of the two general categories of devices being tested:
our 93000 Series platform, designed to test System-on-a-Chip (SOC),
System-in-a-Package (SIP) and high-speed memory devices, and our V5000 Series platform,
designed to test memory devices, including flash memory and multi-chip
packages. Our test solutions are both
scalable and flexible. Our test
platforms are scalable across different frequency ranges, different pin counts
and different numbers of devices under simultaneous test. Our test platforms flexibility allows for a
single test system to test a wide range of applications for semiconductor
devices. Our scalable platform
architecture provides us with internal operating model efficiencies such as
relatively lower research and development costs, engineering headcount, support
requirements and inventory risk. The
scalability and flexibility of our test solutions also provides economic
benefits to our customers by allowing them to get their complex, feature-rich
semiconductor devices to market quickly and to reduce their overall costs. In addition to our test equipment, our
solutions include advanced analysis tools as well as consulting, service and
support offerings such as start-up assistance, application services and system
calibration and repair.

We have a broad customer
base, with almost 1,900 93000 Series systems and more than 2,550 V5000 Series systems
installed worldwide as of July 31, 2008.
Our customers include integrated device manufacturers (IDMs), test
subcontractors, also referred to as subcontractors, which includes specialty
assembly, package and test companies as well as wafer foundries, and fabless
design companies.

Prior to our
initial public offering, we were a wholly-owned subsidiary of Agilent Technologies,
Inc (Agilent). We became an
independent company on June 1, 2006, when we separated from Agilent. On June 13, 2006, we completed our
initial public offering and became a separate stand-alone publicly-traded
company incorporated in Singapore focused on technology and innovation in
semiconductor testing. We design,
develop, manufacture and sell advanced test systems and solutions for the
semiconductor industry. We offer a
single platform for each of the two general categories of devices being tested:
our 93000 Series platform, designed to test System-on-a-Chip (SOC),
System-in-a-Package (SIP) and high-speed memory devices, and our V5000 Series platform,
designed to test memory devices, including flash memory and multi-chip
packages. Our test solutions are both
scalable and flexible. Our test
platforms are scalable across different frequency ranges, different pin counts
and different numbers of devices under simultaneous test. Our test platforms flexibility allows for a
single test system to test a wide range of applications for semiconductor
devices. Our scalable platform
architecture provides us with internal operating model efficiencies such as
relatively lower research and development costs, engineering headcount, support
requirements and inventory risk. The
scalability and flexibility of our test solutions also provides economic
benefits to our customers by allowing them to get their complex, feature-rich
semiconductor devices to market quickly and to reduce their overall costs. In addition to our test equipment, our
solutions include advanced analysis tools as well as consulting, service and
support offerings such as start-up assistance, application services and system
calibration and repair.

We have a broad customer base, with more than 1,800
93000 Series systems and more than 2,500 V5000 Series systems
installed worldwide as of April 30, 2008.
Our customers include integrated device manufacturers (IDMs), test
subcontractors, also referred to as subcontractors, which includes specialty
assembly, package and test companies as well as wafer foundries, and fabless
design companies.

Verigy became an independent company on June 1,
2006, when we separated from Agilent Technologies Inc. We design, develop, manufacture and sell
advanced test systems and solutions for the semiconductor industry. We offer a single platform for each of the
two general categories of devices being tested: our 93000 Series platform,
designed to test System-on-a-Chip (SOC), System-in-a-Package (SIP) and
high-speed memory devices, and our Versatest V5000 Series platform,
designed to test memory devices, including flash memory and multi-chip
packages. Our test solutions are both
scalable and flexible. Our test
platforms are scalable across different frequency ranges, different pin counts
and different numbers of devices. Our
test platforms flexibility allows for a single test system to test a wide
range of applications for semiconductor devices. Our scalable platform architecture provides us
with internal operating model efficiencies such as reduced research and
development costs, engineering headcount, support requirements and inventory
risk. The scalability and flexibility of
our test solutions also provides economic benefits to our customers by allowing
them to get their complex, feature-rich semiconductor devices to market quickly
and to reduce their overall costs. We
also provide test and application expertise, and service and support through
our worldwide service organization.

We have a broad customer installed base, having sold
over 1,700 of our 93000 Series systems and over 2,500 Versatest Series systems
as of January, 31, 2008. Our customers
include integrated device manufacturers, or IDMs, test subcontractors, also
referred to as subcontractors, which includes specialty assembly, package and
test companies as well as wafer foundries, and fabless design companies.

Our executive compensation program is integral to our goal of maximizing long-term shareholder value. The executive team consists of highly sought
after individuals with readily available opportunities and ascertainable market values. Our primary goal is to provide these market competitive opportunities while strongly linking realized values to
the creation of superior long-term shareholder value creation.

We
regularly monitor trends, conduct benchmarking studies and generally strive to position our executives between the competitive 25th and
75th percentiles. However, we do not adhere to specific formulas, internal pay multiples or market positioning when determining any individual executive's compensation.

Verigy ("we," "us" or the "Company") designs, develops, manufactures and supports semiconductor test equipment and provides test system solutions that are used in
the manufacture of System-on-a-Chip (SOC), System-in-a-Package (SIP), high-speed memory and memory devices. In
addition to test equipment, our solutions include consulting, service and support offerings such as start-up assistance, application services and system calibration and repair.

Prior
to our initial public offering, we were a wholly owned subsidiary of Agilent. On June 16, 2006, we completed our initial public offering and became a separate stand-alone
publicly-traded company incorporated in Singapore focused on technology and innovation in semiconductor testing. Effective October 31, 2006 ("the distribution date"), Agilent distributed the
50 million Verigy ordinary shares it owned to its shareholders. See Note 4, "IPO, Separation from Agilent and Distribution" for further information regarding our initial public offering,
our separation from Agilent and Agilent's distribution of our ordinary shares to its shareholders.

Verigy became an independent company on June 1,
2006, when we separated from Agilent Technologies Inc. We design, develop, manufacture and sell
advanced test systems and solutions for the semiconductor industry. We offer a single platform for each of the
two general categories of devices being tested: our 93000 Series platform,
designed to test System-on-a-Chip (SOC), System-in-a-Package (SIP) and
high-speed memory devices, and our Versatest V5000 Series platform,
designed to test memory devices, including flash memory and multi-chip
packages. Our test solutions are both
scalable and flexible. Our test
platforms are scalable across different frequency ranges, different pin counts
and different numbers of devices. Our
test platforms flexibility allows for a single test system to test a wide
range of applications for semiconductor devices. Our scalable platform architecture provides
us with internal operating model efficiencies such as reduced research and
development costs, engineering headcount, support requirements and inventory
risk. The scalability and flexibility of
our test solutions also provides economic benefits to our customers by allowing
them to get their complex, feature-rich semiconductor devices to market quickly
and to reduce their overall costs. We
also provide test and application expertise, and service and support through
our worldwide service organization.

We have a broad customer installed base, having sold
over 1,550 of our 93000 Series systems and over 2,450 Versatest
Series systems as of July, 31, 2007.
Our customers include integrated device manufacturers, or IDMs, test
subcontractors, also referred to as subcontractors, which includes specialty
assembly, package and test companies as well as wafer foundries, and fabless
design companies.

Verigy became an independent company on June 1,
2006, when we separated from Agilent Technologies Inc. We design, develop,
manufacture and sell advanced test systems and solutions for the semiconductor
industry. We offer a single platform for each of the two general categories of
devices being tested: our 93000 Series platform, designed to test
System-on-a-Chip (SOC), System-in-a-Package (SIP) and high-speed memory
devices, and our Versatest V5000 Series platform, designed to test memory
devices, including flash memory and multi-chip packages. Our test solutions are
both scalable and flexible. Our test platforms are scalable across different
frequency ranges, different pin counts and different numbers of devices. Our
test platforms flexibility allows for a single test system to test a wide
range of applications for semiconductor devices. Our scalable platform
architecture provides us with internal operating model efficiencies such as
reduced research and development costs, engineering headcount, support
requirements and inventory risk. The scalability and flexibility of our test
solutions also provides economic benefits to our customers by allowing them to
get their complex, feature-rich semiconductor devices to market quickly and to
reduce their overall costs. We also provide test and application expertise, and
service and support through our worldwide service organization.

We have a broad customer installed base, having sold
over 1,500 of our 93000 Series systems and over 2,400 Versatest
Series systems. Our customers include integrated device manufacturers, or
IDMs, test subcontractors, also referred to as subcontractors, which includes
specialty assembly, package and test companies as well as wafer foundries, and
fabless design companies.

Verigy became an independent company on June 1,
2006, when we separated from Agilent Technologies Inc. We design, develop,
manufacture and sell advanced test systems and solutions for the semiconductor
industry. We offer a single platform for each of the two general categories of
devices being tested: our 93000 Series platform, designed to test
System-on-a-Chip (SOC), System-in-a-Package (SIP) and high-speed memory
devices, and our Versatest V5000 Series platform, designed to test memory
devices, including flash memory and multi-chip packages. Our test solutions are
both scalable and flexible. Our test platforms are scalable across different
frequency ranges, different pin counts and different numbers of devices. Our
test platforms flexibility allows for a single test system to test a wide
range of applications for semiconductor devices. Our scalable platform
architecture provides us with internal operating model efficiencies such as
reduced research and development costs, engineering headcount, support
requirements and inventory risk. The scalability and flexibility of our test solutions
also provides economic benefits to our customers by allowing them to get their
complex, feature-rich semiconductor devices to market quickly and to reduce
their overall costs. We also provide test and application expertise, and
service and support through our worldwide service organization.

We have a broad customer installed base, having sold
over 1,450 of our 93000 Series systems and over 2,300 Versatest
Series systems. Our customers include integrated device manufacturers, or
IDMs, test subcontractors, also referred to as subcontractors, which includes
specialty assembly, package and test companies as well as wafer foundries, and
fabless design companies.

Verigy (we, us or the Company) designs, develops
and manufactures semiconductor test equipment and provides test system
solutions that are used in the manufacture of System-on-a-Chip (SOC),
System-in-a-Package (SIP), high-speed memory and memory devices. In addition to
test equipment, our solutions include consulting, service and support offerings
such as start-up assistance, application services and system calibration and
repair.

Prior to our initial public offering, we were a wholly
owned subsidiary of Agilent. On June 16, 2006, we completed our initial
public offering and became a separate stand-alone publicly-traded company
incorporated in Singapore focused on technology and innovation in semiconductor
testing. Effective October 31, 2006 (the distribution date), Agilent
distributed the 50 million Verigy ordinary shares it owned to its shareholders.
See Note 4, IPO, Separation from Agilent and Distribution for further
information regarding our initial public offering, our separation from Agilent
and Agilents distribution of our ordinary shares to its shareholders.

Our fiscal year end is October 31, and our fiscal
quarters end on January 31, April 30, and July 31.

Amounts included in the
accompanying combined and consolidated financial statements are expressed in
U.S. dollars.

Verigy (we, us or the Company)
designs, develops and manufactures semiconductor test equipment and provides
test system solutions that are used in the manufacture of System-on-a-Chip
(SOC), System-in-a-Package (SIP), high-speed memory and memory devices. In addition to test equipment, our solutions
include consulting, service and support offerings such as start-up assistance,
application services and system calibration and repair.

On August 15, 2005, Agilent Technologies Inc.
announced its intention to separate our business into a stand-alone
publicly traded company focused on technology and innovation in semiconductor
testing. As of May 31, 2006, we had
issued 50,000,000 ordinary shares to our then sole shareholder, Agilent. The
separation of our business from Agilent was completed on June 1,
2006. Until the completion of our
initial public offering (IPO) on June 16, 2006, we were a wholly owned
subsidiary of Agilent.

Our
registration statement on Form S-1 was declared effective on June 12, 2006
(File No. 333-132291). Pursuant to the registration statement, we offered and
sold 8.5 million of our ordinary shares in the IPO at a price of $15 per share,
which less underwriting discount and commission, resulted in aggregate net
proceeds of approximately $118.6 million, net of approximately $9 million of
underwriting discounts and commissions. On July 6, 2006, the underwriters of
the IPO exercised a portion of their over-allotment option which resulted in
the issuance of additional 151,559 shares and generated approximately $2.1 million
in net proceeds. The remaining portion of the underwriters over-allotment has
lapsed. As a result, we have
approximately 58.7 million ordinary shares outstanding as of July 6, 2006. In
addition, Agilent made a payment to us of $19.3 million on July 14, 2006,
the amount by which the aggregate net proceeds of our IPO were less than
$140 million.

We will release Agilent by
October 31, 2007 from specified guarantees or other security obligations that
Agilent has entered into or will enter into on our behalf. These guarantees and security arrangements
relate to real property lease deposits and guarantees, security for company
credit card programs and other credit arrangements and required deposits with
governmental trade and tax agencies.
Since Agilent will have no obligation to maintain any such guarantees or
other security obligations on our behalf following October 31, 2007, we will be
liable for these deposits and guarantees that are currently estimated to be
approximately $13 million in aggregate.

Verigy and Agilent entered into a
master separation and distribution agreement prior to the completion of our initial
public offering that contains the key provisions relating to the separation,
initial public offering and the distribution, which is currently intended to
occur by the end of fiscal year 2006.
The master separation and distribution agreement describes generally the
agreements and other documents that were delivered on the separation date,
including the ancillary agreements.
These ancillary agreements include the general assignment and assumption
agreement, the tax sharing agreement, the employee matters agreement, the
intellectual property matters agreement, the manufacturing trademark license
agreement and the transition services agreement. Agilent has advised us that it
currently intends to distribute to its shareholders all of our ordinary shares that
it holds by the end of its fiscal year, October 31, 2006. In addition, pursuant to the master
separation and distribution agreement, we entered into a revolving credit
facility with Agilent on the separation date.
As of June 16, 2006, we have used part of our proceeds to repay
Agilent $25 million, the amounts owing under a short-term revolving credit
facility entered into with Agilent on the date of our separation.

Our fiscal year end is
October 31, and our fiscal quarters end on January 31, April 30, and July
31.

Verigy (we, us or the Business)
design, develop and manufacture semiconductor test equipment and provide test
system solutions that are used in the manufacture of System-on-a-Chip (SOC),
System-in-a-Package (SIP), high-speed memory and memory devices. In addition to
test equipment, our solutions include consulting, service and support offerings
such as start-up assistance, application services and system calibration and
repair.

On August 15, 2005, Agilent
Technologies Inc. announced its intention to separate the Business into a stand-alone
publicly traded company focused on technology and innovation in semiconductor
testing. The separation of our business from Agilent was completed on June 1,
2006. Until the completion of our
initial public offering (IPO) on June 16, 2006, we were a wholly owned
subsidiary of Agilent. Our registration statement on Form S-1
was declared effective on June 12, 2006 (File No. 333-132291).
Pursuant to the registration statement, we offered and sold 8.5 million of our
ordinary shares in the IPO at a price of $15 per share, which less underwriting
discounts and commission related in aggregated net proceeds of approximately
$118.6 million. On July 6, 2006, the underwriters of the IPO exercised a
portion of their over-allotment option which resulted in the issuance of
additional 151,559 shares and generated approximately $2.1 million in net
proceeds. The remaining portion of the underwriters over-allotment has lapsed. As a result, we have approximately
58.7 million ordinary shares outstanding as of July 6, 2006. In addition, under the master separation and
distribution agreement with Agilent, we expect Agilent to make a payment to us
of $19.3 million, the amount by which the aggregate net proceeds of our
IPO were less than $140 million.

We have also agreed to cause
Agilent to be released by October 31, 2007 from specified guarantees or
other security obligations that Agilent has entered into or will enter into on
our behalf. Agilent will have no obligation to maintain any such guarantees or
other security obligations on our behalf following October 31, 2007. These
guarantees and security arrangements relate to real property lease deposits and
guarantees, security for company credit card programs and other credit
arrangements, and required deposits with governmental trade and tax agencies
and are currently estimated to be approximately $13 million in the aggregate.

Verigy and Agilent entered into a
master separation and distribution agreement prior to the completion of our
initial public offering that contains the key provisions relating to the
separation, initial public offering and the distribution, which currently
intended to occur by the end of fiscal year 2006. The master separation and
distribution agreement describes generally the agreements and other documents
that were delivered on the separation date, including the ancillary agreements.
These ancillary agreements include the general assignment and assumption
agreement, the tax sharing agreement, the employee matters agreement, the
intellectual property matters agreement, the manufacturing trademark license
agreement and the transition services agreement. In addition, pursuant to the
master separation and distribution agreement, we entered into a revolving
credit facility with Agilent on the separation date.

Our fiscal year end is October 31,
and our fiscal quarters end on January 31, April 30, and July 31.